RAID is a way to setting up your drives in different configurations.
Here's the
Wiki article explaining it, but here's the basics:
RAID 0: Takes multiple hard drives and "links" them together to create one big drive. So, say you have three 320Gb drives. If you don't use RAID, then in Windows, you will see Drive C (which will be where Windows is installed), Drive D and Drive E. If you apply RAID 0, they will show up as one giant Drive C with 960 Gb. It's convenient (for some people) but it's also good because it affords faster read/write times, since the computer is reading the data from all three drives at the same time, meaning it can access data three times as fast. However, you're three times more likely to have a drive failure - which will mean you lose all your data (on ALL drives since it's spread across them.)
RAID 1: For this you need an even number of drives, and all it does is mirror the data from one drive onto another. This means that you always have two copies of each drive (or each set of drives, if you have RAID 0) so that if one fails, not only do you not lose any data, but you can keep using your computer normally. All you have to do is replace the dead drive and it will "rebuild" the setup to how it was previously. Main issue with this setup is that you only get to use half the storage you have free, since half is devoted to a second copy. Great if you're a data-loss freak though!
There are other RAID configurations you can read about in the article, but those are the two basic ones. RAID 0+1 for example, takes, say three hard drives - and makes them look like one big drive - and then mirrors those to three more drives acting as one big drive (so, RAID 1 applied to a RAID 0 setup.)